Nearly 200 advisers who pose serious compliance concerns have been found among the ranks of the licensees associated with the four major banks and AMP, according to a report released by ASIC, which also flagged lagging efforts on breach and misconduct reporting.
In its Report 515 Financial advice: Review of how large institutions oversee their advisers, ASIC stated it had found 185 advisers who had been non-compliant with financial services law between 2009 and 2015, with 149 of those reported by the five institutions during the course of the report project.
ASIC stated it was already aware of 101 of these advisers having already banned 26 under its Wealth Management Project and conducting ongoing investigations or surveillance activities in relation to 75 advisers.
The regulator said the level of breaches and the delay in reporting them were of concern and that there appeared to be a variance in how often these were reported to ASIC.
“We reviewed the breach reports and other notifications provided to ASIC by the institutions since 1 January 2009. From the information held on our registers, and information provided to us by the institutions, it was apparent that reporting practices varied, with some of the institutions notifying ASIC more often,” ASIC stated in the report.
“However, nearly half of the SCC (Serious Compliance Concern) advisers were not notified to ASIC until the licensees identified and reported their SCC advisers to us in response to our direction.”
“We observed that, where breach reports were lodged relating to the SCC advisers, there was often a considerable delay between the institution first becoming aware of the suspected non-compliant conduct and the breach report being lodged with ASIC,” the report added.
“there was often a considerable delay between …the suspected non-compliant conduct and the breach report being lodged with ASIC”
ASIC also flagged inadequate background and reference-checking processes, and inadequate audit processes to assess whether the advice complied with the ‘best interest’ duty and other obligations as areas in which the licensees of the five institutions needed to improve.
The regulator stated it had created the report following information it had received about non-compliant advice and due to public concerns about wider problems in large advice firms.
The report covered 35 advice groups aligned to AMP, ANZ, CBA, NAB and Westpac, which at the time of the report accounted for 1% of advice licensees but around 40%, or 8900 financial advisers.
ASIC Deputy Chairman Peter Kell said the report does highlight some of the work done by the five institutions to implement large-scale review and remediation programs with the regulator acknowledging the work to improve advice and compliance practices.
“However, there is further work to be done to assist in re-building consumer trust and confidence in the financial advice industry,” Kell said, adding “Failure or delay in notifying ASIC of suspected serious non-compliant conduct significantly affects our ability to take appropriate enforcement or other regulatory action.
“More importantly, it may also result in an increased risk of customer detriment as so-called ‘bad apple’ advisers continue to work in the industry,” Kell said.
